Glossary

Best interest standard

A conduct rule requiring agents and advisers to recommend products that serve the customer's needs without putting their own pay first.

Also called: best interest rule, best interest obligation

A best interest standard is a rule of conduct for people who sell or recommend financial products. For annuities, the main U.S. version comes from the NAIC's Suitability in Annuity Transactions Model Regulation, revised in 2020 and since adopted by most states. It requires an insurance producer recommending an annuity to act in the consumer's best interest and not put the producer's own financial interest ahead of the consumer's. New York applies a similar standard to life insurance sales as well.

The NAIC model breaks the duty into four obligations: care (know the customer's finances, goals and needs, and have a reasonable basis for the recommendation), disclosure (explain the producer's role, what they can sell and how they are paid), conflict of interest (identify and avoid or reduce material conflicts) and documentation (record the basis for the recommendation). Broker-dealers selling variable annuities follow a parallel federal rule, the SEC's Regulation Best Interest, in effect since 2020.

The standard is stronger than plain suitability but is not a full fiduciary duty, and it does not ban commissions. Hypothetical example: a producer can still recommend a commissioned indexed annuity, but must be able to show why it fits the client's needs and objectives. See best interest rules for annuity sales and The DOL fiduciary rule and annuity sales: where it stands in 2026.

Last reviewed October 4, 2026

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Related terms

Suitability The requirement that an agent recommend an annuity or other product only after gathering enough information to judge that it fits the buyer. Fiduciary A person or firm legally bound to act in someone else's best interest with loyalty and care, such as a trustee, executor or registered investment adviser. NAIC (National Association of Insurance Commissioners) The standard-setting body of the chief insurance regulators of all 50 states, D.C. and five territories, which writes model laws and coordinates oversight. Policy replacement Buying a new life policy or annuity while dropping, surrendering or borrowing heavily against an existing one, a sale states regulate closely. Annuity A contract with a life insurer that grows savings tax-deferred, turns them into guaranteed income, or both, in exchange for one or more payments.

Related guides

Best interest rules for annuity sales What the NAIC annuity best interest model (#275) requires of agents and insurers, how states adopted it, how Reg BI and New York differ, and what to ask. The DOL fiduciary rule and annuity sales: where it stands in 2026 The 2024 Retirement Security Rule never took effect and was removed from the federal rulebook in 2026. What that means for annuity and rollover advice today. Variable life insurance and the securities rules that govern it Variable life is both insurance and a security. How SEC registration, the prospectus, FINRA licensing and state insurance law apply, and how to check a seller.